EXHIBIT 10.1 - WARRANT AGREEMENT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY)
IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING
THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
For the Purchase of No. 1
60,000 shares of Common Stock
DATE OF WARRANT: MAY 15, 2003
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK OF
ACTION PRODUCTS INTERNATINAL, INC.
(A FLORIDA CORPORATION)
FOR VALUE RECEIVED, Action Products International, Inc. ("Company"), hereby
certifies that CEOCast, Inc. ("Holder"), or his, her or its Permitted
Transferees with its principal executive offices located at 00 Xxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to time during the
period commencing on the date hereof and expiring on May 14, 2004, Sixty
Thousand (60,000) shares of Common Stock, par value $.001 per share, of the
Company ("Common Stock"), at a purchase price equal to $2.00 per share (the
"Warrant"). The number of shares of Common Stock purchasable upon exercise of
this Warrant, and the purchase price per share, each as adjusted from time to
time pursuant to the provisions of this Warrant, are hereinafter referred to as
the "Warrant Shares" and the "Exercise Price," respectively.
1. EXERCISE
(a) PROCEDURE FOR EXERCISE. This Warrant may be exercised by the Holder, in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
form attached hereto duly executed by such Holder) at the principal office of
the Company, or at such other office or agency as the Company may designate,
accompanied by payment to the Company of the Exercise Price multiplied by the
number of Warrant Shares to be purchased ("Aggregate Purchase Price") (i) in
cash, (ii) by certified check, (iii) by wire transfer, or (iv) by a combination
of (i), (ii) and (iii).
(b) DATE OF EXERCISE. Each exercise of this Warrant shall be deemed to have
been effected immediately prior to the close of business on the day on which
this Warrant, together with the Notice of Exercise form attached hereto duly
executed by such Holder or Permitted Transferee shall have been surrendered to
the Company. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise shall be
deemed to have become the holder or holders of record of the Warrant Shares
represented by such certificates.
(c) ISSUANCE OF CERTIFICATE. As soon as practicable after the exercise of
the purchase right represented by this Warrant, and in any event within ten (10)
business days thereafter, the Company at its expense will use its best efforts
to cause to be issued in the name of, and delivered to, the Holder, or, subject
to the terms and conditions hereof, to such other individual or entity as such
Holder (upon payment by such Holder of any applicable transfer taxes) may direct
(i) a certificate or certificates for the number of full shares of Warrant
Shares
to which such Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, an additional
share as determined pursuant to Section 3 hereof, and (ii) in case such exercise
is in part only, a new Warrant or Warrants (dated the date hereof) of like
tenor, stating on the face or faces thereof the number of shares currently
stated on the face of this Warrant minus the number of such shares purchased by
the Holder upon such exercise as provided in Section 1(a) above. The Company
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Warrant Shares upon exercise of this Warrant.
(d) CASHLESS EXERCISE. As an alternative to the exercise procedures set
forth in Section 1(a), this Warrant may be exercised by the Holder at any time
on or after October 12, 2003, by directing the Company to retain from the
Warrant Shares being purchased Warrant Shares with an aggregate Fair Market
Value as of the date of exercise equal to the Aggregate Purchase Price. For
purposes of this Warrant, "Fair Market Value" means, with respect to a share of
Common Stock, either: (x) if there shall not then be a public market for the
Common Stock, the fair market value per share of Common Stock as determined by
the Board of Directors in good faith exercising its fiduciary duties; or (y) if
there shall then be a public market for the Common Stock, the Daily Market
Prices (as defined below) for the Trading Day during which the Holder delivers
to the Company written notice of exercise under this Section 1(d), provided,
however, if such notice is after the close of trading on such Trading Day, the
Holder must deliver such notice to the Company prior to commencement of trading
of the Common Stock on the following Trading Day. The "Daily Market Price" for
such Trading Day shall be: (A) the last sale price on such day on the principal
stock exchange or the Nasdaq Stock Market ("Nasdaq") on which the Common Stock
is then listed or admitted to trading; (B) if no sale takes place on such day on
any such exchange or Nasdaq, the average of the last reported closing bid and
ask prices on such day as officially quoted on any such exchange or Nasdaq; (C)
if the Common Stock is not then listed or admitted to trading on any stock
exchange or Nasdaq, the average of the last reported closing bid and ask prices
on such day in the over-the-counter market as furnished by the Nasdaq or the
National Quotation Bureau, Inc.; (D) if neither Nasdaq nor the National
Quotation Bureau, Inc. is, at the time, engaged in the business of reporting bid
and ask prices, as furnished by any similar firm then engaged in such business;
or (E) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers (the "NASD") selected by the Holder and the
Company or, if they cannot agree upon such selection, the average furnished by
two such members of the NASD, one of which shall be selected by the Holder and
one of which shall be selected by the Company. "Trading Day" for this purpose
means any day that the New York Stock Exchange is open for trading. The right of
the Holder under this Section 1(d) shall terminate on the date the Securities
and Exchange Commission declares effective a registration statement registering
the offer and sale by the Holder of the Warrant Shares under the Securities Act
of 1933, as amended.
2. ADJUSTMENTS.
(a) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the outstanding shares
of the Company's Common Stock at any time while this Warrant remains outstanding
and unexpired shall be subdivided or split into a greater number of shares, or a
dividend in Common Stock shall be paid in respect of Common Stock, the Exercise
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall, simultaneously with the effectiveness of such subdivision
or split or immediately after the record date of such dividend (as the case may
be), shall be proportionately decreased. If the outstanding shares of Common
Stock shall be combined or reverse-split into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination or reverse split
shall, simultaneously with the effectiveness of such combination or reverse
split, be proportionately increased. When any adjustment is required to be made
in the Exercise Price, the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Exercise Price
in effect immediately prior to such adjustment, by (ii) the Exercise Price in
effect immediately after such adjustment.
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(b) RECLASSIFICATION REORGANIZATION, CONSOLIDATION OR MERGER. In the case
of any reclassification of the Common Stock (other than a change in par value or
a subdivision or combination as provided for in Section 2(a) above), or any
reorganization, consolidation or merger of the Company with or into another
corporation (other than a merger or reorganization with respect to which the
Company is the continuing corporation and which does not result in any
reclassification of the Common Stock), or a transfer of all or substantially all
of the assets of the Company, or the payment of a liquidating distribution then,
as part of any such reorganization, reclassification, consolidation, merger,
sale or liquidating distribution, lawful provision shall be made so that the
Holder of this Warrant shall have the right thereafter to receive upon the
exercise hereof, the kind and amount of shares of stock or other securities or
property which such Holder would have been entitled to receive if, immediately
prior to any such reorganization, reclassification, consolidation, merger, sale
or liquidating distribution, as the case may be, such Holder had held the number
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined by
the Board of Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Holder of this Warrant such that the provisions set forth in this Section
2 (including provisions with respect to the Exercise Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
(c) MERGER, CONSOLIDATION, SHARE EXCHANGE, REORGANIZATION, ETC. If all or
any portion of this Warrant shall be exercised subsequent to any merger,
consolidation, recapitalization, exchange of shares, or reorganization of the
Company, sale or transfer of substantially all of the assets of the Company, or
other similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different number of
shares of the same or another class or classes of securities of the Company or
another entity, then lawful provision shall be made by the Company so that the
Holder exercising this Warrant shall receive, for the aggregate Exercise Price
paid upon such exercise, the aggregate number and class of shares which such
Holder would have received if this Warrant had been exercised immediately prior
to such merger, consolidation, recapitalization, exchange of shares,
reorganization, sale or other similar event.
(d) NO LIMITATIONS ON THE COMPANY. This Warrant shall not affect or limit
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets. Nothing herein shall be
construed as creating any limitations upon the right and authority of the Board
of Directors of the Company to adopt such incentive compensation arrangements
(which arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or individuals) as the
Board of Directors in its discretion determines desirable, including, without
limitation, the granting of stock options or stock appreciation rights.
(e) NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company but will at all times in good
faith assist in the carrying out of all the provisions of this Section 2 and in
the taking of all such actions as may be necessary or appropriate in order to
protect against impairment of the rights of the Holder of this Warrant to
adjustments in the Exercise Price.
3. FRACTIONAL SHARES. The Company shall not be required to issue fractions
of shares of Common Stock upon exercise. If any fractions of a share would, but
for this Section 3, be issuable upon any exercise, in lieu of such fractional
share the Company shall round up to the nearest whole number.
4. LIMITATION ON SALES. Each holder of this Warrant acknowledges that this
Warrant and the Warrant Shares, as of the date of original issuance of this
Warrant, have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or
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otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
in the absence of (a) an effective Registration Statement under the Securities
Act as to this Warrant or such Warrant Shares or (b) an opinion of counsel,
reasonably acceptable to the Company, that such registration and qualification
are not required. The Warrant Shares issued upon exercise thereof shall be
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY) IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING
THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
The Holder hereof and the Company agree to execute such other documents and
instruments as the Company reasonably deems necessary to effect the compliance
of the issuance of this Warrant and any shares of Common Stock issued upon
exercise hereof with applicable federal and state securities laws.
The Company covenants and agrees that (i) all Warrant Shares which may be issued
upon exercise of the Warrant, upon issuance, shall be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof; (ii) the Company will not close its books against the exercise
of the Warrant or the transfer of the Common Stock issued or issuable upon
exercise of the Warrant in any manner which would interfere with the timely
exercise of the Warrant; and (iii) the Company will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
effecting the exercise of the Warrant, the full number of shares of Common Stock
which would be deliverable upon the exercise of the Warrant.
5. TRANSFER OF WARRANT. This Warrant may not be transferred, in whole or in
part, whether by operation of law or otherwise, to any person or business
entity, without the prior written consent of the Company, and any assignment to
the contrary shall be null and void and of no force and effect. Notwithstanding
the foregoing, but subject to the provisions of Section 4, the Holder may
transfer the Warrant or a portion thereof to one or more trusts established for
the exclusive benefit of such Holder and/or one or more of the Holder's spouse,
children, grandchildren, parents, siblings, nieces or nephews (collectively,
"Permitted Transferees"), or at death to the Holder's estate, to any of the
Holder's Permitted Transferees, or to one or more trusts all of the
beneficiaries of which are one or more of the Holder's Permitted Transferees;
provided, however, that any such transferee shall hold the transferred Warrant
subject to the terms and conditions of this Agreement. Any transfer permitted by
the immediately preceding sentence shall be made by presentation of the Warrant
to the Company with written instructions for such transfer, including evidence
that the transfer is permitted hereunder. Upon such presentation for transfer,
the Company shall promptly execute and deliver a new Warrant or Warrants in the
form hereof in the name of the assignee or assignees and in the denominations
specified in such instructions. The Company shall pay all expenses incurred by
it in connection with the preparation, issuance and delivery of Warrants as
permitted under this Section.
6. GENERAL RESTRICTIONS. The Company shall not be required to sell or issue
any Warrant Shares under this Warrant if the sale or issuance of such Warrant
Shares would constitute a violation by the individual exercising the Warrant or
by the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration, or qualification of any Warrant Shares subject to the
Warrant upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the
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issuance or purchase of Warrant Shares hereunder, the Warrant may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Company, and any delay caused thereby shall in no way
affect the date of termination of the Warrant. Specifically, in connection with
the Securities Act, unless a registration statement under the Securities Act is
in effect with respect to the Warrant Shares covered by the Warrant, the Company
shall not be required to sell or issue such Warrant Shares unless the Company
has received evidence satisfactory to it that the holder of the Warrant may
acquire such Warrant Shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Company shall be
final, binding, and conclusive. Except as provided herein, the Company may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of the Warrant or the issuance
of Warrant Shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Warrant shall not be exercisable unless and until the
Warrant Shares covered by the Warrant are registered or are subject to an
available exemption from registration, the exercise of the Warrant (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption. The Warrant shall not be exercisable unless the Holder shall
have received all required regulatory approvals with respect to ownership of the
Warrant Shares to be issued upon such exercise.
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TRANSFERS. The Company will maintain a register containing the names and
addresses of the Holders of this Warrant. Any Holder may change its, his or her
address as shown on the warrant register by written notice to the Company
requesting such change. Until any transfer of this Warrant is made in the
warrant register, the Company may treat the Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
9. PAYMENT OF TAXES. The Holder agrees to promptly pay in cash to the
Company, upon demand, any taxes that Company (or any affiliate of the Company)
may be required to withhold or collect in connection with any exercise of the
Warrant.
10. CERTAIN NOTICES
(a) NOTICE OF ADJUSTMENT. Upon any adjustment of the Exercise Price, the
Company shall forthwith give written notice thereto to the Holder of this
Warrant describing the event requiring the adjustment, stating the adjusted
Exercise Price and the adjusted number of shares purchasable upon the exercise
hereof resulting from such event, and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
(b) NOTICES OF RECORD DATE. In case: (i) the Company shall take a record of
the holders of its Common Stock (or other stock or securities at the time
deliverable upon the exercise of this Warrant) for the purpose of entitling or
enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of any class or any other
securities, or to receive any other right, or (ii) of any capital reorganization
of the Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the surviving entity), or
any transfer of all or substantially all of the assets of the Company, or (iii)
of
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the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
notice shall not affect the legality or validity of any such action.
(c) FORM AND DELIVERY REQUIREMENTS. All notices, demands, requests, or
other communications which may be or are required to be given, served, or sent
by any party to any other party pursuant to this Warrant ("Notices") shall be in
writing and shall be provided or given in one of the following five ways: (i)
personal delivery, (ii) overnight courier service which provides a receipt
acknowledging delivery, (iii) express mail or registered mail, return receipt
requested, (iv) first class or priority mail, or (v) facsimile transmission.
Within twenty four (24) hours of the time the party providing or giving the
Notice deposits with or turns over the Notice (1) to the agent for personal
delivery, (2) to an overnight courier service for delivery, (3) to a postal
service office for delivery, return receipt requested, by express mail or
registered mail, or (4) to a postal service box or office for delivery by first
class or priority mail, such party providing or giving the Notice shall also
transmit via facsimile a copy of such Notice, if less than fifty pages in
length, to the other party at its facsimile number herein provided. All such
Notices shall be deemed to have been so provided or given as follows: (a)
provided or given by personal delivery--upon actual delivery to or refusal to
accept delivery by party of the Notice, (b) provided or given by overnight
courier service which provides a receipt acknowledging delivery--upon actual
delivery to or refusal to accept delivery by party of the Notice during normal
business hours, (c) provided or given by express mail or registered mail, return
receipt requested--upon actual delivery to or refusal to accept delivery by
party of the Notice during normal business hours, (d) provided or given by first
class or priority mail--the date and time the party who is the sender receives
from party who is a recipient a statement or acknowledgement signed by receiving
party that such party received the Notice, and (e) provided or given by
facsimile transmission--the date and time party who is transmitting the Notice
by facsimile receives from the party who is receiving the Notice a statement or
acknowledgment signed by such party that the Notice was received by facsimile
transmission. Notices to a party shall be addressed to such party at its
following address and facsimile number, or at such other address and facsimile
number, and to the attention of such other officers or individuals as it may
from time to time designate to the other parties in writing:
(i) If to the Company:
Action Products International, Inc.
Attn: Chief Financial Officer
000 X. Xxxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
(ii) If to Holder, the address of the Holder as maintained on the
books and records of the Company,
or to such other address as may be designated by a party in a notice to the
other. Each notice, demand, request or communication that shall be given or made
in the manner described above shall be deemed sufficiently given or made for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, the affidavit of messenger or (with respect to a
facsimile) the facsimile confirmation report being deemed
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conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
11 . REGISTRATION RIGHTS.
11.1 PIGGYBACK REGISTRATION.
(a) RIGHT TO PIGGYBACK. If (i) the Company proposes to register any of its
Common Stock under the Securities Act except for offerings pursuant to
registration statements relating to employee benefit plans or with respect to
corporate reorganization or other transactions under Rule 145 of the Securities
Act or otherwise registered on Form S-4 under the Securities Act (a "Qualified
Public Offering") and (ii) the registration form to be used may be used for the
registration of the Holder Registrable Securities (a "Piggyback Registration"),
the Company will at least thirty (30) days prior to a Qualified Public Offering
give written notice to the Holder of its intention to effect such a public
offering. If the Holder desires to dispose of any the Holder Registrable
Securities (as defined below) in the public offering, it shall provide written
notice thereof to the Company within fifteen (15) days after the receipt of any
such notice, specifying the Holder Registrable Securities intended to be
disposed of by the Holder. Subject to Section 11.1(b), the Company will use its
commercially reasonable efforts to effect the registration under the Securities
Act of all Holder Registrable Securities which the Company has been so requested
to register by the Holder on the same terms and conditions as the securities
otherwise being sold in such registration, to the extent requisite to permit the
disposition of the Holder Registrable Securities requested to be so registered.
Nothing in this Section 11.1 shall prevent the Company from abandoning, at any
time, an offering under which the Holder has requested a Piggyback Registration.
(b) Priority in Piggyback Registrations. When a registration pursuant to
this Section 11.1 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters, if the managing underwriter
of such underwritten offering informs the Company in writing of its belief that
the number of securities requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
adversely affecting the price to be received thereon, then the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account or all
securities (other than Holder Registrable Securities) proposed by the Company to
be sold for the account of the holders thereof who had requested such
registration, as the case may be; second, other registrable securities with
priority over the Registrable Securities (based on the Company's agreements with
the holders thereof); third, such Holder Registrable Securities requested to be
included in such registration so proposed to be sold and so requested to be
included; and fourth, other securities requested to be included in such
registration, in such proportion as the Company may determine (based upon its
agreements with the holders thereof). The Company agrees that any such
determination is to be made solely by the managing underwriter and the Company
agrees that it will act in good faith in seeking to have sold in the offering
all of the shares requested to be sold.
11.2 REGISTRATION PROCEDURES. If, whenever and to the extent that the
Company is required to use commercially reasonable efforts to effect the
registration of any Holder Registrable Securities under the Securities Act as
provided in Section 11.1, the Company will as expeditiously as possible:
(i) prepare and file with the Commission the requisite registration
statement to effect such registration and thereafter use commercially reasonable
efforts to cause such registration statement to become and remain effective for
a period of one hundred eighty (180) days or, if earlier, until all of such
Holder Registrable Securities have been disposed of, provided that the Company
may discontinue any registration of its securities at any time prior to the
effective date of the registration statement relating thereto;
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(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period set forth in Section 11.3(i) above;
(iii) furnish to Holder such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents as Holder may reasonably request in order to dispose of
the Holder Registrable Securities;
(iv) use commercially reasonable efforts to register or qualify all
Holder Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such United States
jurisdictions as Holder shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, except that the Company shall not for any such purpose (a) be required
to qualify generally to do business as a foreign corporation in any
jurisdiction, (b) to subject itself to taxation in any such jurisdiction or (c)
to consent to general service of process in any such jurisdiction;
(v) notify Holder, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made; and
(vi) use its commercially reasonable efforts to furnish, on the
date that such Registrable Securities are delivered to the underwriters for
sale, if such securities are being sold through underwriters, (i) an opinion,
dated as of such date, of the counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and (ii) a letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
11.3 HOLDBACK AGREEMENTS. If, in connection with a public offering of
shares of Common Stock of the Company registered pursuant to the Securities Act,
the managing underwriter for such registration shall so request, the Holder
shall not sell, make any short sale of, grant any option for the purchase of, or
otherwise dispose of any Holder Registrable Securities (other than those Holder
Registrable Securities included in such registration) without the prior written
consent of the Company for a period designated by the Company in writing to the
Holder, which period shall begin not more than thirty (30) days prior to the
date the Company has fixed plans to file the registration statement pursuant to
which such public offering shall be made and shall not last more than one
hundred eighty (180) days (or such other period as the officers and directors of
the Company shall determine) after the effective date of such registration
statement while this Warrant remains outstanding and unexpired..
11.4 COPIES OF REGISTRATION STATEMENTS. The Company shall promptly provide
the Holder with copies of all registration statements the Company files with the
Commission under the Securities Act during the term of this Warrant Agreement.
11.5 INDEMNIFICATION.
8
(a) Indemnification by the Company. In the event of any
registration of any Holder Registrable Securities under the Securities Act, to
the extent permitted by law, the Company will indemnify and hold harmless
Holder, its officers and directors, each underwriter for Holder, and each other
Person, if any, who controls any of the foregoing Persons within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint or
several ("Losses"), to which the Holder or any such director or officer or
underwriter or controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, (ii) any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto or any
document incident to registration or qualification of any Holder Registrable
Securities, (iii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or (iv) any violation by the Company of the Securities Act or state
securities or blue sky laws applicable to the Company and relating to action or
inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws (clauses (i) - (iv)
above referred to hereafter as, a "Violation"); provided (i) that the Company
shall not be liable in any such case to the extent that any such Losses (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company for use in
connection with such registration; (ii) that the Company shall not be liable to
any Person who participates as an underwriter in the offering or sale of Holder
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such Losses (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting a Violation at or prior to the written confirmation of the sale of
Holder Registrable Securities to such Person if such Violation was corrected in
such final prospectus; and (iii) that the Company shall not be liable for any
amounts paid in settlement of any Losses or action if such settlement is
effected without the consent of the Company. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling Person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by Holder. In the event of any
registration of the Holder Registrable Securities under the Securities Act, to
the extent permitted by law, the Holder will indemnify and hold harmless the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Person selling securities under
such registration statement or any of such other Person's partners, directors or
officers or any Person who controls such Person, against any Losses, to which
the Company or any such director, officer, controlling Person, underwriter, or
such director, officer or controlling Person of such Person may become subject
under the Securities Act or Exchange Act or other federal or state law, if such
Losses arise out of or relate to a Violation that arose out of or related to the
Company's reliance upon written information furnished to the Company about the
Holder for use in the preparation of such registration. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by the Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
11.5, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations
9
under the preceding subdivisions of this Section 11.5, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable for any settlement made by the
indemnified party without its consent (which consent will not be unreasonably
withheld) or for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Agreement shall for any reason be unavailable to an indemnified party under
Section 11.5(a) or 11.5(b) hereof in respect of any Losses (or any action or
proceeding in respect thereof), then each indemnifying party shall, in lieu of
indemnifying such party, contribute to the amount paid or payable by such
indemnified party as a result of such Losses (or action or proceeding in respect
thereof), in such proportion as shall be appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holder included in the
offering on the other hand, from the offering of the Holder Registrable
Securities, and (ii) the relative fault of the Company on the one hand and the
holders of the Holder Registrable Securities included in the offering on the
other, with respect to the statements or omissions which resulted in such Losses
(or action or proceeding in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Holder on the other with respect to such offering shall be
deemed to be in the same proportion as the sum of the total subscription price
paid to the Company in respect of the securities sold pursuant to the offering
plus the total net proceeds from the offering of the securities (before
deducting expenses) received by the Company bears to the amount by which the
total net proceeds from the offering of the securities (before deducting
expenses) received by the Holder with respect to such offering exceeds the
Exercise Price paid to the Company in respect of the Holder Registrable
Securities, and in each case the net proceeds received from such offering shall
be determined as set forth on the table of the cover page of the prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Holder, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 11.5 were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to in this Section 11.5 shall be deemed to
include, for purposes of this Section 11.5, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Survival of Indemnity Obligations. The obligations of the
Company and the Holder under this Section 11.5 shall survive completion of any
offering of Holder Registrable Securities in a registration statement and the
termination of this Agreement. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
10
(f) Limitation on Preliminary Prospectus Liability. The
foregoing indemnity agreements of the Company and the Holder are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement in question becomes effective
or the amended prospectus filed with the Commission pursuant to Commission Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any Person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the Person asserting the Losses at or
prior to the time such action is required by the Securities Act.
11.6 NO ASSIGNMENT OF REGISTRATION RIGHTS. The rights hereunder to
cause the Company to register the Holder Registrable Securities may not be
assigned by Holder except in connection with an assignment of the Warrant made
in accordance with the terms of this Warrant Agreement.
11.7 REGISTRATION EXPENSES.
(a) Company Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, and fees and disbursements of
counsel for the Company and its independent certified public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but excluding discounts and commissions and transfer taxes, if any)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne by the Company, and in addition the
Company will pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), and the expense of any annual audit or quarterly review, the
expense of any liability insurance or other expenses for the preparation of
financial statements or other data normally prepared by the Company in the
ordinary course of its business or which the Company would have incurred in any
event.
(b) Holder Expenses. To the extent Registration Expenses are
not required to be paid by the Company, Holder will pay those Registration
Expenses allocable to the registration of the Warrant Shares so included,
including fees of counsel for Holder, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
11.8 FURTHER COVENANTS RELATING TO AND LIMITATIONS ON REGISTRATION RIGHTS
OF THE HOLDER.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 11.1 that Holder (i) agrees
to sell any Holder Registrable Securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(b) The Company may require Holder to furnish to the Company
such information regarding the Holder and the distribution of Warrant Shares as
the Company may from time to time reasonably request in writing. The Company
will give Holder copies of any registration statements and each prospectus filed
with the Commission, and each amendment thereof or supplement thereto.
(c) The Holder agrees by acquisition of such Holder
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 11.3(v), the Holder will
forthwith discontinue such Holder's disposition of Holder Registrable Securities
pursuant to the
11
registration statement relating to such Holder Registrable Securities until
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 11.3(v) and, if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, then in the Holder's possession of the
prospectus relating to such Holder Registrable Securities current at the time of
receipt of such notice.
(d) The Holder shall have no right to obtain or seek an
injunction restraining or otherwise delaying any registration of the Company's
securities as the result of controversy that might arise with respect to the
interpretation or implementation of this Agreement.
(e) The Company shall have no obligation with respect to any
registration requested pursuant to Section 11.1 or 11.2 to the extent the
aggregate net proceeds reasonably anticipated to be received by the Holder in
consideration for such Holder Registrable Securities would exceed the then
outstanding amount of the Judgment.
11.9 DEFINITIONS. As used in this Section 11, unless the context
otherwise requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
Exchange Act: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar federal
statute.
Holder Registrable Securities: Common Stock issued pursuant to
this Warrant and (ii) any shares of Common Stock issued or issuable in respect
of such Common Stock upon any stock split, stock dividend, recapitalization, or
similar event. Shares of Common Stock shall only be treated as Registrable
Securities if they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or, in the opinion of counsel to the Company, are available for sale in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
Person: A corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, an
estate, a governmental or political subdivision thereof or a governmental
agency.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar federal statute.
11.10 TERMINATION. The right to request registration or inclusion in any
registration pursuant to Section 11.1 shall terminate on the date that the
Holder Registrable Securities may immediately be sold under Rule 144 during any
90-day period.
12. REDEMPTION.
(a) Right of Redemption. The Company may, on twenty (20) days
prior written notice, redeem this Warrant at $0.001 per share of Common Stock
issuable upon exercise of this Warrant as of the Redemption Date (as defined
below), provided, however, that before any such call for redemption of this
Warrant
12
can take place there shall be in effect a registration statement under the
Securities Act which registered the resale of the Common Stock issuable upon
exercise of the Warrant.
(b) Redemption Procedure. In the event the Company exercises
its right to redeem all of this Warrant, it shall give or cause to be given
notice to the Holder of this Warrant, by mailing to such Holder a notice of
redemption, first class, postage prepaid, not later than the twentieth (20th)
day before the date fixed for redemption, at its last address as shall appear on
the records of the Company. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where this Warrant
shall be delivered and the redemption price shall be paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on
the Trading Day immediately preceding the date fixed for redemption. The date
fixed for the redemption of this Warrant shall be the "Redemption Date",
provided, however, that the Redemption Date may not be prior to August 13, 2003.
No failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to
the Holder (A) to whom notice was not mailed or (B) whose notice was defective.
An affidavit of the Secretary or Assistant Secretary of the Company that notice
of redemption has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(c) Right to Exercise. Any right to exercise a warrant shall
terminate at 5:00 p.m. (New York time) on the Trading Day immediately preceding
the Redemption Date. The redemption price payable to Holder shall be mailed to
the Holder at its address of record.
13. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a shareholder of the Company. Holder will have and may exercise rights as a
shareholder on all stock of the Company held by Holder.
14. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. AMENDMENTS. The terms and provisions of this Warrant may not be
modified or amended, or any provisions hereof waived, temporarily or
permanently, except by written consent of the Company and the Holder hereof.
16. BINDING EFFECT. Subject to all restrictions provided for in this
Warrant and by applicable law relating to assignment and transfer of this
Warrant, this Warrant shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, and permitted assigns.
17. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement and
supersedes all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. Neither this Warrant
nor any term hereof may be amended, waived, discharged, or terminated except by
a written instrument signed by the Company and the Holder; provided, however,
that the Company or the Holder unilaterally may waive any provision hereof in
writing to the extent that such waiver does not adversely affect the interests
of the other party hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.
18. COUNTERPARTS. To facilitate execution, this Warrant may be executed in
counterparts. It shall not be necessary that the signatures of, or on behalf of,
each party, or that the signatures of all persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the signature of, or
on behalf of, each party, or that the signatures of the persons required to bind
any party, appear on one or more of the counterparts. All counterparts shall
collectively constitute a single contract. It shall not be necessary in making
proof of this Warrant to produce or account for more than a number of
counterparts containing the respective
13
signatures of, or on behalf of, all of the parties hereto. Without limiting the
generality of the foregoing, the exchange by the parties hereto of counterparts
by facsimile transmission shall be sufficient by create a binding and
enforceable agreement.
19. GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Florida (excluding the choice of law
rules thereof).
20. JURISDICTION AND VENUE. Any legal suit, action or proceeding arising
out of or relating to this Warrant shall be instituted exclusively in New York
State Supreme Court, County of New York or in the United States District Court
for the Southern District of New York. Each party hereto waives any objection to
the venue of any such suit, action or proceeding and the right to assert that
such forum is not a convenient forum for such suit, action or proceeding and
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. Each party hereto
further agrees to accept and acknowledge service or any and all process which
may be served in any such suit, action or proceeding in New York State Supreme
Court, County of New York or in the United States District Court for the
Southern District of New York and agrees that service of process upon it mailed
by certified mail to its address shall be deemed in every respect effective
service of process upon it in any suit, action or proceeding.
IN WITNESS WHEREOF, each of the parties hereto has executed this Warrant or
caused this Warrant to be duly executed on its behalf as of the date first above
written.
ISSUER:
ACTION PRODUCTS INTERNATIONAL, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------
Title: PRESIDENT AND CEO
HOLDER:
CEOCast, Inc.
By: /s/
Title: PRESIDENT
---------
14
NOTICE OF EXERCISE
TO: Action Products International, Inc.
Attn: Chief Financial Officer
000 X. Xxxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
1. The undersigned hereby elects to purchase ________ shares of the
Common Stock of Action Products International, Inc., pursuant to terms of the
attached Warrant, and tenders herewith payment of the Exercise Price of such
shares in full, together with all applicable transfer taxes, if any, in the
following manner: (check one box)
[ ] cash
[ ] certified check
[ ] wire transfer
[ ] a combination of any of the foregoing
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned or in such other name as is
specified below:
3. The undersigned represents that he/she/it will only sell the shares
of Common Stock pursuant to an effective Registration Statement under the
Securities Act of 1933, as amended, or an exemption from registration
thereunder.
-----------------------------------------
(Name)
-----------------------------------------
(Address)
-----------------------------------------
-----------------------------------------
(Telephone Number)
-----------------------------------------
(Facsimile Number)
-----------------------------------------
(E-mail Address)
-----------------------------------------
(Taxpayer Identification Number)
By: _____________________________________
Title: __________________________________
Date: ___________________________________
15
